Single-family residence buy & hold investment.
Purchase price: $170,000
Cash invested: $25,000
Build a house on my property below my primary residence to rent. Build cost is around $170,000, final appraised value around $250-$270,000. All in cost per month $1200 and it will rent for $1975 per month. The home is a 1250 square foot single story residence with three bedrooms and 2 bathrooms on 1/3 acre.
What made you interested in investing in this type of deal?
The numbers made sense and I had the resources. Credit lines were the key here to build before the eventual refi. This was much easier than a conventional construction loan.
How did you find this deal and how did you negotiate it?
I researched and built the unit using my local contractor.
How did you finance this deal?
Traditional back and credit lines.
How did you add value to the deal?
Negotiating, a little pocket cash, I owned the land as part of my several acre estate.
What was the outcome?
I have at least $600 positive cash flow of this one unit.
Lessons learned? Challenges?
Construction cost soar so plan for at least 30% increases.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Has Rohr owner and builder of Platinum Homes in Pierce County Wa. and Tay Toliver branch manager with Wells Fargo bank.
@Chris R. My wife keeps trying to convince me to do this at our house in Kirkland. I'm hesitant because I think the costs will be a LOT higher here first off. Second, our lot is pretty flat and if I tapped the sewer line in the house, we wouldn't have the fall to make it work. I'd either need to do a grinder pump which is unacceptable to me on a rental OR I would need to convince Kirkland to allow me another hot-tap and side sewer off the main which just sounds expensive to me and possibly not feasible.
I have a gravity system on the main house and a pump system in the ADU. I'm told the pump system is pretty common. It cost around $20,000 all in. The reason for this system is that the field is slightly uphill.
Good morning! This is perfect!
Could you tell me more about the financing? What does "traditional back" mean. And when you say credit line, you're referring to a HELOC?
I'll have more questions, I'm sure.
Thanks so much!
Traditional bank I think is why your referring to. As far as the credit lines, yes a HELOC.
I then went to the bank after all was finished and refinanced into a 30 year fixed rate. Keep in mind that the banks will not value an ADU like a traditional home so if you do not have enough equity for the loan to value you Amy not get approved.
You can count on the value of the ADU being close or lower than what you pay to build it.
This play was all about cash flow and long term hold.
I had plenty of equity in the land and home to refi with no issues.
Hope this helps
Hooray! It does help! We live in a very rural area, so I have no idea what our home (and 20 acres) would appraise for. We bought it a year ago, but believe we bought with at least 30k in equity.
I also found your article! Well done! Thanks so much!
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